UNITED STATES OF AMERICA
Before the
COMMODITY FUTURES TRADING COMMISSION

___________________________________________

)

In the Matter of:

)

CFTC Docket No. 00-31

)

STANLEY EDWARD
MOORE,

)

ORDER INSTITUTING
PROCEEDINGS

)

PURSUANT TO SECTIONS 6(c) AND
6(d)

Respondent.

)

OF THE COMMODITY EXCHANGE
ACT,

)

AS AMENDED, MAKING FINDINGS,
AND

___________________________________________

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IMPOSING REMEDIAL
SANCTIONS

I.

The Commodity Futures Trading Commission (the
"Commission") has reason to believe that Stanley Edward Moore
("Moore") has violated Sections 4b(a)(i) and (iii) and
4o(1) of the Commodity Exchange Act, as amended (the
"Act"), 7 U.S.C §§ 6b(a)(i) and (iii) and
6o(1) (1994), and Commission Regulation ("Regulation")
4.41(a), 17 C.F.R. § 4.41(a) (2000). Therefore, the Commission deems
it appropriate and in the public interest that public administrative
proceedings be, and they hereby are, instituted to determine whether
Moore engaged in violations set forth in this Order and to determine
whether any order should be issued imposing remedial sanctions.

II.

In anticipation of the institution of this
administrative proceeding, Moore has submitted an Offer of Settlement
(the "Offer") that the Commission has determined to accept.
Without admitting or denying the findings of fact of this Order, and
prior to any adjudication on the merits, Moore acknowledges service of
this Order. Moore consents to the use of the findings in this Order in
this proceeding and in any other proceeding brought by the Commission, or
to which the Commission is a party.1

III.

The Commission finds the following:

A. SUMMARY

From in or about March 1999 to June 2000, Moore, while
acting as a registered commodity trading advisor ("CTA"),
defrauded and deceived clients and prospective clients by making material
misrepresentations and omissions on his Web site, in violation of
Sections 4b(a)(i) and (iii) and 4o(1) of the Act and Regulation
4.41(a). Moore's Web site advertised "Rhythm of the
Markets," Moore's system for trading S&P 500 futures
contracts and other instruments, such as options on the S&P 100
index, which trade on the Chicago Board Options Exchange ("OEX
options"). Moore represented on his Web site that he had personally
profitably traded S&P 500 futures contracts ("S&P 500
futures") using Rhythm of the Markets. In fact, Moore had not
personally traded profitably. Moore also provided on his Web site his
purported actual profits and actual rate of return trading OEX options
pursuant to Rhythm of the Markets, which he presented in part as an
indicator of the efficacy of the system for trading S&P 500 futures
contracts. In fact, Moore had not actually traded OEX options between
March 1999 and June 2000, and these results were hypothetical trading
results, which Moore failed to disclose.2

B. RESPONDENT

Stanley Edward Moore, who resides and works at 900
South Meadows Parkway, Apt. 722, Reno, NV 89511, has been registered with
the Commission as a CTA since April 1996.

C. FACTS

From March 1999 to June 2000, Moore's Web site,
www.rhythmofthemarkets.com, advertised "Rhythm of the Markets,"
Moore's system for trading S&P 500 futures and other instruments,
such as OEX options. Moore's system consisted of a 200-page
"trading manual" explaining Moore's trading methodology,
"proprietary software" for trading, video and audiotaped
presentations of how Moore purportedly trades, access to Moore's
charts, and telephone consultation with Moore.

Moore's Web site touted his past experience
profitably trading S&P 500 futures using Rhythm of the Markets. For
example, a letter from the co-author of "Rhythm of the
Markets," Joe Conway ("Conway"), was posted on the Web
site which referred to Moore as a "super trader" and
stated:

(1) Having watched hundreds of his trades with our
methodology, I am amazed at his high percentage of wins. When he's
wrong, which isn't very often, he can tell you why. I've seen
him do dozens of consecutive trades without a loss in the S&P. On
the average, I've seen him make $1,000-$2,000 a day trading one
S&P contract. When he trades more contracts, he makes more
money;

and

(2) The methodology is called, "Rhythm of the
Markets" and Ed has made a substantial amount of money trading it.
He is a trader who makes his living trading everyday.

In addition, Moore's Web site quoted Moore as
saying that: "Ten (S&P contracts) is enough for me to trade
because my palms start to sweat when I trade more than 10." In fact,
Moore did not actually trade S&P 500 futures for his own
account.

Conway was quoted on the Web site as saying that:
"For his own trading, Moore tends to focus on the S&P futures
and stock index options (OEX). He generally trades three to four times a
day, once in the morning and two or three times in the
afternoon."

Moore's Web site represented that Rhythm of the
Markets was equally effective in trading S&P 500 futures and OEX
options. Moore provided on his Web site his purported history of trading
OEX options for virtually each day from March 1999 to April 2000,
including his purported actual profits and purported actual rate of
return as of the end of each day. Moore did not actually trade OEX
options in his own account at any time between March 1999 and June 2000
and his purported track record and profits trading OEX options were based
on hypothetical trading, which Moore failed to disclose.

D. LEGAL DISCUSSION

1. Moore Violated Section 4b(a)(i) and
(iii) of the Act

Section 4b(a)(i) and (iii) of the Act provides that
it shall be unlawful, in or in connection with any order to make or the
making of a futures contract, for or on behalf of any other person, (i)
to cheat or defraud, or attempt to cheat or defraud, such other person,
or (iii) willfully to deceive or attempt to deceive such other person
by any means whatsoever in regard to any such order or contract or the
disposition or execution of any such order or contract, or in regard to
any act of agency performed with respect to such order or contract for
such person. Misrepresentations and omissions of material facts made
with scienter regarding futures transactions constitute fraud under
Section 4b(a) of the Act.3
Additionally, Section 4b(a)(i) and (iii) requires that the material
misrepresentations and omissions of material facts be made "in
connection" with futures transactions.4

Moore's knowing misrepresentations on his Web
site that he made his living trading S&P 500 futures using Rhythm
of the Markets and that he was a profitable "super trader,"
when he had not traded futures for his own account, constitute fraud
within the meaning of Section 4b(a)(i) and (iii) of the Act. In the
Matter of R&W Technical Services, Ltd., [Current Transfer
Binder] Comm. Fut. L. Rep. (CCH) ¶27,582 at 47,742 (CFTC Mar. 16,
1999) (falsely claiming profitable trading through respondents' own
use of the trading system constitutes fraud; "[t]he use of a
trading system by its developers is important to reasonable consumers
because it reflects a meaningful vote of self-confidence and a sign of
authenticity") aff'd in relevant part, R&W Technical
Services, Ltd. v. CFTC, 205 F.3d 165, 169-70 (5th Cir.
2000). Moore's representations on his Web site that his system was
equally effective trading in commodity futures contracts and OEX
options and that the OEX trading results were based on his actual
trading using the system when he had not traded OEX options between
March 1999 and June 2000 also constitute fraud, in violation of Section
4b(a)(i) and (iii) of the Act.

In addition, Moore's representation that his
system had generated profits and positive rates of return, when he knew
that such claims were not based on actual trading, but rather on
hypothetical or simulated trading, constitutes fraud, in violation of
Section 4b(a)(i) and (iii) of the Act. "Because simulated results
inherently overstate the reliability and validity of an investment
system, and because extravagant claims understate the inherent risks in
commodities trading, a reasonable investor would find [such] fraudulent
misrepresentations to be material." R&W Technical
Svcs., 205 F.3d at 170. See alsoCFTC v. Skorupskas,
605 F. Supp. 923, 933 (E.D. Mich. 1985) (solicitations aided through
use of false or deceitful performance tables violated Section
4b(a)).

2. Moore Violated Section 4o(1) of the
Act and Section 4.41(a) of the Regulations

Section 4o(1) of the Act prohibits CTAs from
(a) employing any device, scheme or artifice to defraud any client or
participant or prospective client or participant, or (b) engaging in
any transaction, practice, or course of business which operates as a
fraud or deceit upon any client or participant or prospective client or
participant. Section 4.41(a) of the Regulations prohibits a CTA or
principal thereof from advertising in a fraudulent or misleading
manner.

In order to establish a violation of Section
4o(1) of the Act and Section 4.41(a) of the Regulations, the
Division must prove that the respondent was (i) a CTA or, with respect
to Section 4.41(a) of the Regulations, a principal thereof, and (ii)
either (a) employed any device, scheme, or artifice to defraud any
client or prospective client, or (b) engaged in any transaction,
practice, or course of business which operates as a fraud or deceit
upon any client or prospective client. Section 4o(1) of the Act,
which also requires the use of the mails or any means or
instrumentality of interstate commerce, prohibits both registered and
unregistered CTAs from defrauding their clients.5 Section 4.41(a) of the Regulations also
applies to all CTAs, regardless of whether those CTAs are required to
be registered.

Under Section 1a(5) of the Act, in order to
establish that someone is a CTA, it must be shown that the person (i)
advised another about the value or advisability of trading in futures
contracts, (ii) "either directly or through publications, writings
or electronic media," (iii) for compensation or profit. Section
1a(5) of the Act, 7 U.S.C. § 1a(5).6 Moore, who is registered as a CTA, gave
commodity futures trading advice for compensation or profit and,
therefore, is a CTA. 7

The same conduct by Moore that violated Section
4b(a)(i) and (iii) of the Act also violated Section 4o(1) of the
Act and Regulation 4.41(a) because Moore engaged in that conduct in his
capacity as a CTA. R&W Technical Svcs., ¶27,582 at
47,745 ("Because we have found that [respondents] violated Section
4b(a) of the Act and that they acted as CTAs, further analysis is not
needed to conclude that [respondents] also violated Section
4o(1) of the Act"), aff'd in relevant part,
R& W Technical Services v. CFTC, 205 F.3d 165 (5th
Cir. 2000);Skorupskas, 605 F.Supp. at 932-33.

IV.

FINDINGS OF VIOLATIONS

Based on the foregoing, the Commission finds that
Moore violated Sections 4b(a)(i) and (iii) and 4o(1) of the Act
and Regulation 4.41(a).

V.

OFFER OF SETTLEMENT

Moore has submitted an Offer of Settlement
("Offer") in which, without admitting or denying the findings
of fact in this Order, he:

A. Admits the jurisdiction of the Commission with
respect to all matters set forth in the Order;

B. Acknowledges service of the Order;

C. Waives:

1. the filing and service of a Complaint and Notice
of Hearing;

2. a hearing;

3. all post-hearing procedures;

4. judicial review by any court;

5. any objection to the staff's participation in
the Commission's consideration of its Offer;

6. all claims which he may possess under the Equal
Access to Justice Act, 5 U.S.C. § 504 (1994) and 28 U.S.C. §
2412 (1994), as amended by the Small Business Regulatory Enforcement
Fairness Act of 1996, Pub. L. No. 104-121, §§ 231-232, 110
Stat. 862-863, and Part 148 of the Regulations, 17 C.F.R. §§
148.1, etseq. (2000), relating to, or arising from, this
action, and he shall not assert any right under the Equal Access to
Justice Act to seek costs, fees, or other expenses relating to, or
arising from, this proceeding; and

7. any claim of double jeopardy based upon the
institution of this proceeding or the entry in this proceeding of any
order imposing a civil monetary penalty or any other relief;

D. Stipulates that the record basis on which this
Order is entered consists solely of this Order and its findings to which
he has consented in the Offer, which are incorporated in this Order;
and

E. Consents, solely on the basis of the Offer, to the
Commission's issuance of this Order, which makes findings and:

1. orders Moore to cease and desist from violating
Sections 4b(a)(i) and (iii) and 4o(1) of the Act and Regulation
4.41(a);

3. orders that Moore's registration with the
Commission as a Commodity Trading Advisor be suspended for a period of
six (6) months from the date of this Order; and

4. orders Moore to comply with his undertakings as
set forth below.

VI.

ORDER

Accordingly, IT IS HEREBY ORDERED THAT:

1. Moore shall cease and desist from violating
Sections 4b(a)(i) and (iii) and 4o(1) of the Act and Regulation
4.41(a);

2. Moore's registration as a CTA shall be
suspended for a period of six (6) months from the date of this
Order;

3. Moore shall pay a civil penalty in an amount of
Fifteen Thousand Dollars ($15,000) within ten (10) days of the date of
the Order. Moore shall make such payment by U.S. postal money order,
certified check, bank cashier's check or bank money order, made
payable to the Commodity Futures Trading Commission, and sent to Dennese
Posey, Division of Trading and Markets, Commodity Futures Trading
Commission, Three Lafayette Centre, 1155 21st Street, N.W.,
Washington, D.C. 20581, under cover of a letter that identifies Moore and
the name and docket number of the proceeding; Moore shall simultaneously
transmit a copy of the cover letter and of the form of payment to
Director, Division of Enforcement, Commodity Futures Trading Commission,
1155 21st Street, N.W. Washington, D.C. 20581. In accordance
with Section 6(e)(2) of the Act, if Moore fails to make payment of his
penalty within fifteen (15) days of the respective due date, he shall be
automatically prohibited from trading on all contract markets until he
shows to the satisfaction of the Commission that payment of the full
amount of the penalty with interest thereon to the date of payment has
been made; and

4. Moore shall comply with the following
undertakings:

A. he shall not misrepresent, expressly or by
implication:

1. the performance, profits or results achieved by,
or the results that can be achieved by, users, including himself, of
any commodity futures or options trading system or advisory service;
and

2. the risks associated with trading pursuant to any
commodity futures or options trading system or advisory service;

B. he shall not present the performance of any
simulated or hypothetical commodity interest account, transaction in a
commodity interest or series of transactions in a commodity interest
unless such performance is accompanied by the following statement, as
required by 17 C.F.R. § 4.41(b):

Hypothetical or simulated performance results
have certain inherent limitations. Unlike an actual performance
record, simulated results do not represent actual trading. Also,
since the trades have not actually been executed, the results may
have under- or over-compensated for the impact, if any, of certain
market factors, such as lack of liquidity. Simulated trading programs
in general are also subject to the fact that they are designed with
the benefit of hindsight. No representation is being made that any
account will or is likely to achieve profits or losses similar to
those shown.

In doing so, Moore shall clearly identify those
hypothetical or simulated performance results that were based, in whole
or in part, on hypothetical trading results;

C. he shall not make any representation of financial
benefits associated with any commodity futures or options trading
system or advisory service without first disclosing, prominently and
conspicuously, that futures trading involves high risks with the
potential for substantial losses;

D. he shall not represent, expressly or by
implication:

1. the performance, profits or results achieved
by, or the results that can be achieved by, users, including himself,
of any commodity futures or options trading system or advisory
service;

2. the risks associated with trading using any
commodity futures or options trading system or advisory
service;

3. that the experience represented by any user,
testimonial or endorsement of the commodity futures or options
trading system or advisory service represents the typical or ordinary
experience of members of the public who use the system or advisory
service; unless: (a) he possesses and relies upon a
reasonable basis substantiating the representation at the time it is
made; and (b) for two (2) years after the last date
of the dissemination of any such representation, he maintains all
advertisements and promotional materials containing such
representation and all materials that were relied upon or that
otherwise substantiated such representation at the time it was made,
and makes such materials immediately available to the Division for
inspection and copying upon request; and

E. neither he nor any of his agents or employees
under his authority or control shall take any action or make any public
statement denying, directly or indirectly, any findings or conclusions
in this Order or creating, or tending to create, the impression that
this Order is without a factual basis; provided, however, that nothing
in this provision affects Moore's (1) testimonial obligations; or
(2) right to take contrary factual or legal positions in other
proceedings to which the Commission is not a party. Moore will
undertake all steps necessary to assure that all of his agents and
employees under his authority and control understand and comply with
this undertaking.

By the Commission.

Dated: September 6, 2000

______________________

Jean A. Webb

Secretary to the Commission

Commodity Futures Trading Commission

NOTES:

1 Moore does not consent to the
use of this Order as the sole basis for any other proceeding brought by
the Commission other than a proceeding to enforce the terms of this Order
and does not consent to the use of the Offer or this Order, or the
findings consented to in his Offer, by any other person or entity in this
or any other proceeding. The findings made in this Order are not binding
on any other person or entity in any other proceeding.

2 The Internet
is a highly beneficial medium that facilitates the dissemination of
information, but which also enables potential violators to reach millions
of people worldwide quickly and at very low cost. By this proceeding and
the other proceedings being filed contemporaneously, as well as the ten
proceedings filed on May 1, 2000, the Commission is addressing fraud
committed on the Internet to promote the integrity of promotions made on
the Web concerning commodity futures and options trading
opportunities.

4 Fraudulent
statements that induce members of the public to purchase software that
generates specific buy and sell signals for commodity futures trading
satisfy the "in connection with" requirement of Section 4b(a).
R&W Technical Svcs., 205 F.3d at 165. See alsoHirk
v. Agri-Research Council, Inc., 561 F.2d 96 (7th Cir. 1977) (noting
that the "in or in connection with" requirement should be
interpreted flexibly to include deceptive conduct that occurs prior to
the opening of an actual commodity trading account).

5 CFTC v.
Savage, 611 F.2d 270, 281 (9th Cir. 1979) (enforcement action
charging defendant with making false reports to customers, engaging in
"wash" trades and holding himself out to the public as a CTA
without being registered with the Commission).

6 Section
1a(5) specifically excludes from the definition of a CTA anyone who is
"the publisher or producer of any print or electronic data of
general and regular dissemination, including its employees" if such
publisher's or producer's provision of commodity futures trading
advice is "solely incidental to the conduct of [its] business or
profession," and thus Section 4o(1) of the Act and Section
4.41 of the Regulations do not apply to such persons. This exclusion is
designed to protect incidental publishers of advice, such as general
magazines and newspapers, not publishers who specifically concentrate on
commodities advice. R&W Technical Svcs., 205 F.3d at
174.

7 See CFTC
v. British American Commodity Options Corp., 560 F.2d 135, 141 (2d
Cir. 1977), cert. denied, 438 U.S. 905 (1978) (a firm that
"offer[ed] opinions and advice, and issued analyses and reports
concerning the value of commodities" to customers, was a CTA under
the Act); Gaudette v. Panos, 644 F. Supp. 826, 839 (D. Mass. 1986)
(defendants who represented their advisory skills to be exemplary,
suggested that plaintiffs open a commodity account and then
recommended certain futures contracts for investment were
CTAs).